Excerpt: - - 45,836 to the income of the appellant in spite of the fact that both the applicants as well as partners of m/s. a statement by a deponent can be held to be unreliable by the tribunal either on the basis of cross-examination of the deponent or by reference to other material on record leading to the inference that the statement made in the affidavit, cannot be held to be true......3. the assessee then took up the matter to the tribunal. the tribunal after consideration of the material on record held that the letters alleged to have been exchanged between the firm and the assessee were not genuine. in this view of the matter, the tribunal dismissed the appeal. hence at the instance of the assessee, the aforesaid question has been referred to this court,4. shri chitaley, learned counsel for the assessee, contended that the tribunal could not have come to the conclusion that the letters filed by the assessee were not genuine in the face of the affidavits filed on behalf of the assessee showing that no interest was received by or payable to the assessee. learned counsel relied on the decisions in mehta parikh & co. v. cit [1956] 30 itr 181, sohan lal gupta v. cit :.....

Judgment:

Sohani, J.

1. By this reference under Section 256(1) of the I.T. Act, 1961 (hereinafter referred to as 'the Act') the following question of law has been referred to this court for its opinion by the Income-tax Appellate Tribunal, Indore Bench, Indore :

'Whether the Income-tax Appellate Tribunal was right in adding interest of Rs. 45,836 to the income of the appellant in spite of the fact that both the applicants as well as partners of M/s. Ratilal Manekji have filed the affidavits that no interest was receivable or payable ?'

2. The material facts giving rise to this reference briefly are as follows :

The assessee is an individual and the assessment year in question is 1973-74. Initially the ITO assessed the income of the assessee for the year at Rs. 737. The Commissioner, however, directed the ITO to make the assessment afresh after taking into consideration the fact that though the assessee had been making investments in a firm, M/s. Ratilal Manekji, and the credit balance at the beginning of the accounting year stood at Rs. 4,04,588, no interest was shown to have accrued on that amount. When the matter went back to the ITO, the assessee placed reliance on two letters : one by the firm dated October 19, 1971, wherein the firm had intimated to the assessee to withdraw the deposits and the other by the assessee informing the firm that she did not want to withdraw the amount and that the firm could continue to hold deposits without interest. Affidavits of the assessee and the partners of the firm were also filed. The ITO, however, refused to place reliance on the aforesaid letters and affidavits in the circumstances of the case and held that interest income had accrued to the assessee on the opening credit balance of Rs. 4,04,588 and, therefore, interest amounting to Rs. 45,836 was includible in the total income of the assessee. Aggrieved by the order passed by the ITO, the assessee preferred an appeal which was dismissed by the AAC, who observed as follows:

'There is no dispute in the present case that the income has been shown and taxed on accrual basis in the past. In case of interest the right to receive accrues from day to day. Since there has been a long practice of charging interest, it is for the appellant to show that interest did not accrue in the year in question. The appellant's whole case in this regard rests on the correspondence exchanged between the parties. In other words, the appellant's contention is that the right was forgone before it accrued to her. If it really so happened, there is no case with the department but to decide whether it happened or not, which is more a question of fact which must be based on the surrounding circumstances and the test of human probability. Certain facts in this connection assume considerable importance. Firstly, it is important to note that the appellant is the mother of the partners of the debtor-firm. The mother and sons are living together. Though, in the eye of law, the two are different entities, practicality of the situation cannot be lost sight of. Secondly, it is of relevance to note that the interest was charged up to 1972-73 right from 1967-68 in all the years; except for the year in question, the same was again charged in all succeeding years. There should, therefore, be some special reason for not charging the interest in this particular year only. The only reason as stated is the offer of the firm to repay the amount. When the whole question is judged from the angle ofhuman probability, I agree with the ITO that the, story of the offer of repayment from one side and the offer of retention without interest from other does not accord with such probabilities. If the firm suffered losses there is no reason why it should offer to repay. In case of losses, on the other hand, the financial position becomes more tight and the business is generally in need of greater finance. Further, it is also not correct that the firm was at that time in a position to repay such huge amount. It has not been shown that the liquid sources were available to that extent. On the other hand, it is seen that the money remained blocked up not only at that particular time, but also in future where it continued to remain invested with the firm. Under the circumstances, it was neither a natural action nor a possible action on the part of the firm. The correspondence is on simple piece of paper and naturally so. In view of the most intimate relationship existing between the parties, it is not, difficult to produce such correspondence. The fact that the whole thing was a mere afterthought also appears to be true when it is considered that such things are not generally settled by correspondence in writing particularly when the parties are mother and sons and they are living in the same house.'

3. The assessee then took up the matter to the Tribunal. The Tribunal after consideration of the material on record held that the letters alleged to have been exchanged between the firm and the assessee were not genuine. In this view of the matter, the Tribunal dismissed the appeal. Hence at the instance of the assessee, the aforesaid question has been referred to this court,

4. Shri Chitaley, learned counsel for the assessee, contended that the Tribunal could not have come to the conclusion that the letters filed by the assessee were not genuine in the face of the affidavits filed on behalf of the assessee showing that no interest was received by or payable to the assessee. Learned counsel relied on the decisions in Mehta Parikh & Co. v. CIT [1956] 30 ITR 181, Sohan Lal Gupta v. CIT : [1958]33ITR786(All) and Dilip Kumar Roy v. CIT : [1974]94ITR1(Bom) . In reply, Shri Mukati, learned counsel for the Department, contended that the affidavits along with other material on record, had been considered by the Tribunal for arriving at its finding and hence it was not vitiated.

5. The question for consideration is whether the Tribunal could arrive at the finding that interest amounting to Rs. 45,836 had accrued to the assessee in spite of the fact that the assessee and the partners of the firm had filed affidavits stating that no interest was received by or payable to the assessee. Now, an affidavit is a piece of evidence, which, along with other material on record, has to be taken into consideration by the Tribunal before arriving at a finding. The decisions relied on by the assesseeare distinguishable on facts. These decisions lay down that when there is no material on record to disprove the veracity of a statement made in an affidavit, a finding arrived at ignoring 'that statement, would be a finding based on no evidence or a finding which no person acting judicially could have arrived at. In Mehta Parikh & Co. v. CIT [1956] 30 ITR 181, the Supreme Court found that the finding of the Tribunal was a pure surmise and had no basis on the evidence. The Supreme Court found that the cash book of the assessee was accepted, that the entries therein were not challenged and no further documents or vouchers in relation to these entries were called for nor was the presence of the deponents of affidavits considered necessary by either party. The Supreme Court, therefore, held that there was no material whatsoever to justify the finding of the Tribunal. The decision in [1956] 30 ITR 181, cannot be construed to lay down the proposition that unless the deponents are cross-examined, the affidavits cannot be rejected. That decision lays down that if there is no material whatsoever on record for doubting the veracity of the statements made in the affidavits and if the deponents have also not been subjected to cross-examination for bringing out the falsity of their statements, then the Tribunal would not be justified in doubting the correctness of the statements made by the deponents in the affidavits. The finding arrived at in such a case would, according to the Supreme Court, be a finding based on pure surmise, having no basis in evidence. In the instant, case, however, there was material on record which was considered by the Tribunal along with the affidavits and the Tribunal found that no reliance could be placed on the affidavits. A statement by a deponent can be held to be unreliable by the Tribunal either on the basis of cross-examination of the deponent or by reference to other material on record leading to the inference that the statement made in the affidavit, cannot be held to be true.

6. In the instant case, the Tribunal arrived at its finding on a consideration of the entire material on record including the affidavits. The fact that, apart from the affidavits filed by the assessee, there was other relevant material on record, was not disputed on behalf of the assessee. If the veracity of statements in the affidavits was according to the Tribunal disproved by the material on record, the finding of the Tribunal cannot be held to be vitiated, because the Tribunal arrived at the finding by not placing reliance on the affidavits.

7. For all these reasons, our answer to the question referred to us is in the affirmative and against the assessee. No order as to costs.